The property market's slowdown can be attributed to efforts by the federal government and the Swiss National Bank to cool the market, using stricter lending criteria to lower housing debt (currently 90% of all household debt). The recent decision of the central bank to abandon its cap against the euro also made Swiss real estate more expensive for foreign investors, thereby reducing demand, according to Wueest & Partner AG, a real estate consulting firm.

Eastern Switzerland had a house price increase of 3.1% (4.23% inflation-adjusted)

Central Switzerland had a house price increase of 2.94% (4.07% inflation-adjusted)

Western Switzerland had a house price increase of 1.43% (2.55% inflation-adjusted)

Southern Switzerland recorded an annual house price increase of just 0.72% (1.82% inflation-adjusted)

In 2015, the Zurich area saw annual house price rises of 3.43% (4.56% inflation-adjusted) while Berne area house prices rose 3.95% (5.09% inflation-adjusted). In contrast, prices in the Lake Geneva area fell by 3.13% (-2.07% inflation-adjusted).

Swiss property prices are expected to hold steady in 2016, according local property experts. The economy is expected to grow by 1.3% this year, after the central bank gave up its cap on the Swiss franc last year. The economy expanded by just 1% in 2015, after growing by 1.9% in 2014, 1.8% in 2013, 1.1% in 2012, 1.9% in 2011 and 2.9% in 2010, according to the International Monetary Fund (IMF).

If you are buying in Switzerland it is usually not the rental yield that interests you, because in the past Swiss rental returns been comparatively poor, and in any case buying by foreigners is significantly restricted. But as the global house price boom has gathered steam over the past 15 years, Swiss rental returns have stayed steady. Swiss rental returns are still classified by us as "poor". But rental returns in much of the world are now worse than they used to be, and Swiss returns are no longer particularly low.

Rental Income:Income is taxed at the federal, cantonal and municipal levels. The total tax liability could easily exceed 50%. Federal tax rates range from 0% to 11.5%.

Capital Gains:Capital gains are tax-free at the federal level (unless the gains are from the sale of business property). All cantons, however, levy their own taxes on gains from the disposal of immovable property located in the canton.

Inheritance:Inheritance tax is levied at the cantonal level, on the net assets transferred to the beneficiaries.

Residents:Residents are liable to pay federal, cantonal and municipal income taxes on their worldwide income.

Closing costs are relatively low in Switzerland. Roundtrip transaction costs, i.e. the total costs of buying and selling a property, range from 3.5% to 8.9%. The estate agent's fee comprises a large chunk of the cost at roughly 3% to 5% (plus 7.6% VAT), usually paid by the seller.

The buyer pays the Real Estate Transfer Tax which ranges from 0.2% to 3.3%, depending upon the canton. Since January 2005, Transfer Tax has been abolished in Zurich.

Switzerland’s economy unexpectedly stagnated in Q3 2015 from the previous quarter, after a minimal growth of 0.2% in Q2 2015 and a contraction of 0.3% in Q1 2015, mainly due to weak performance in the energy, construction and financial sectors, based on figures from the State Secretariat for Economic Affairs.

The economy was estimated to have expanded by just 1% in 2015, after growing by 1.9% in 2014, 1.8% in 2013, 1.1% in 2012, 1.9% in 2011 and 2.9% in 2010, according to the IMF. The Swiss economy has suffered last year mainly due to the franc, which is considered as “significantly overvalued”, despite record low interest rates. Economic growth is projected at about 1.3% this year.

Economic growth was relatively strong from 2004 to 2007, with average annual GDP growth of 3.5%. However with the global financial crisis, economic growth slowed to 2.2% in 2008. By the 4th quarter of 2008 Switzerland was in recession. GDP contracted by as much as 2.1% in 2009, before returning to positive growth in 2010.

In 2015, the overall unemployment rate stood at about 3.4%, up from 3.2% both in 2013 and 2014, according to the IMF. The country’s jobless rate is expected to rise slightly to 3.6% this year before returning to 3.4% in 2017.

Consumer prices are still falling in Switzerland. In January 2016, core deflation stood at 0.89% down from annual inflation of 0.37% in the same period last year, according to the Swiss Federal Statistical Office. Consumer prices fell by an average of 0.5% from 2012 to 2015.

Exchange rate cap abolishedOn January 15, 2015 the Swiss franc soared against major currencies when the SNB removed its CHF1.20 = EUR 1 exchange rate cap. Immediately the Swiss franc gained 39% against the euro and almost 30% against the US dollar.

The cap was introduced in 2011, when investors fled the crisis-torn Euro for Swiss assets. Switzerland's exporters cried foul when the Swiss franc rose past the US$1.10 mark in March 2011. It went to US$1.20 in June 2011 during the Greek sovereign-debt crisis. It surged to US$1.30 in August 2011.

The exchange rate cap stopped the appreciation of the domestic currency against major currencies.

However recently the SNB decided to abandon the cap in face of monetary easing by the European Central Bank (ECB), believing that increased demand for safe haven currencies such as the Swiss franc would make it impossible to defend the cap.

In January 2016, the average monthly exchange rate stood at CHF1.0932 = EUR 1 and CHF1.0054 = USD 1, according to the Swiss National Bank.

Strong & stable economy

Low transaction costs

Very high rental income tax

Pro-tenant rental market

Serious ownership limits

Low yields in Geneva

RESIDENTIAL PROPERTY FACTS

Price (sq.m):
€11,476 For a 120 sq. m. property, usually an apartment.

Rental Yield:
3.33% For a 120 sq. m. property, usually an apartment.

Rent/month:
€3,827 For a 120 sq. m. property.

Income Tax:
48.56% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.

Roundtrip Cost:
6.21% The total cost of buying and then reselling an apartment. Includes: